Sitting in his office in Government Buildings, Tánaiste Leo Varadkar is in chipper form in spite of the dark clouds hanging over the Irish economy. As Minister for Enterprise, Trade and Employment, the former doctor will be in the front line of political leaders seeking to resuscitate the economy once the pandemic restrictions of the past year begin to lift.
Currently desk bound – he hasn’t been outside Dublin since September – Varadkar laments not being able to get out and about to fulfil the bread and butter duties of his portfolio.
“It’s a pity I can’t get out doing trade missions and actually visiting companies. All the regular things you do as a minister are all gone, from trying to sort out a collective redundancy issue by talking to all the workers on the ground to cutting the ribbon on a new factory,” he says.
Varadkar’s message to business leaders is a mix of good and bad. On a positive note, Varadkar has launched some new supports for businesses impacted by the pandemic. Additional schemes are promised to help the worst affected industries once the economy begins to return to normality.
A new €60 million Covid-19 business aid scheme was launched yesterday to provide grants to businesses ineligible for the Government's existing supports. Wholesalers, suppliers, caterers and events companies that are down 75 per cent or more in turnover will benefit and it will be available to companies, the self-employed, sole traders or partnerships that have a minimum turnover of €50,000.
Vaccination
On the flip side, it could still be quite some time before we return to normal. “There will be some form of restrictions at least until the end of the year if not well into next year,” he says. “I don’t see mass gatherings happening, I don’t see people filling stadiums and things like that, at least until we have 70 or 80 per cent of the population vaccinated and we know that it works in terms of reducing hospitalisations and deaths. Then we’re in a totally different space.
“My best guess ... is that we’ll have a relatively normal summer in that the shops will be open, personal services will be open and domestic tourism will be a real possibility. And potentially outdoor gatherings of 10 to 15 people, maybe even 50 but nothing beyond that until we have a critical mass vaccinated of 70 to 80 per cent; we’re aiming for September for that.
“There is still a worry about next winter because it does seem there’s a seasonal element to this virus. People are indoors more and you’re 20 times more likely to get it indoors than out. So there will be a concern about a fourth wave of some sort next winter and there will be huge caution about allowing mass gatherings until we get through another winter.
“That’s a hard message to sell and not what people want to hear but I think it’s better to be honest about these things.”
He says it will be "some time next year" before we will see full houses again in Croke Park or the Aviva stadium.
So called wet pubs (premises that don’t serve food) have been closed since the first lockdown in the middle of March 2020. When are they likely to be allowed to reopen and what supports will they receive?
Covid supports
“It’s a tricky one because they are indoor spaces and, inevitably, people in pubs drink alcohol, they let their guard down. I don’t think it’s impossible that they could reopen [this year]. There’s so much uncertainty here …and the advice from Nphet is not to put a date on it because there are so many variables.”
He says the Pandemic Unemployment Payment, the Employment Wage Subsidy Scheme, Covid Restrictions Support Scheme and the commercial rates waiver will all be extended beyond the end of March, when they are due to expire. There will be no cliff edge scenario, he insists.
“We’re not in a position as a Government to compensate everyone for income that is lost but we are in a position to help save as many jobs as possible and keep as many jobs going as possible and also to save as many businesses as possible.
“In the last recession, 12 years ago, the construction industry collapsed. It was allowed to collapse in many ways because it was seen as part of the cause of the crisis. And within three years, when we needed an industry to build houses and public infrastructure, it was gone. I want to make sure that this pandemic is a lost year or so and not a lost decade.”
Hospitality
A package of measures will be put in place for businesses that have been worst hit, notably the hospitality, travel and entertainment sectors.
“We would envisage reopening grants when we get to that point, particularly for the hospitality and the travel sector because they’ve been hit the first, hardest and longest. Those sectors will need special help to survive and to reopen.”
The special 9 per cent VAT rate for hospitality, introduced in the last budget, will likely be extended into 2022, he says, and the licensing laws will be updated. “We don’t want to be promoting excess consumption of alcohol but there are things that could be done,” he says. “It might be less about loosening [them] and more about making them realistic. I can’t see a full recovery [for those sectors] until maybe 2023 and heavily caveated with all the uncertainties about the virus and the economy.”
There is a fear in the hospitality sector that the many transatlantic routes that existed pre-pandemic will not return. Aer Lingus’s recent decision to move aircraft from this State to fly transatlantic routes out of Manchester was a worrying signal.
Varadkar wants key routes to New York, Chicago and the west coast as a minimum service, and the Ireland Strategic Investment Fund has agreed a€150 million loan to assist the airline through the crisis.
He says there is also a “good pipeline” of foreign direct investment still coming into the State. “Barely a week goes by and we’re not announcing new jobs in medical devices, pharma, and tech.”
‘Fiscal constraints’
The final bill for Covid will be enormous. “ I think by the time it’s finished we will have borrowed €50 billion,” he says, noting that the longer this crisis goes on the “closer we go to the point where fiscal constraints emerge again”.
“We have to be aware that none of these things can last forever,” he says, suggesting that a drift into 2023 could be problematic for the State’s finances.
“One of the best ways we can ensure an economic recovery and a rapid one is not to threaten people with pay cuts, or welfare cuts or increases in income tax because if people are fearing that, they are less likely to spend and to invest.
“I don’t envisage pay cuts certainly not where the Government controls things. I don’t envisage cuts in welfare or increases in income tax. But we will have to rein in spending. Those expensive Covid-related spending schemes will have to be withdrawn.
“Some people will present that as cuts or austerity. I wouldn’t – I think it’s the withdrawal of temporary emergency measures brought in for the reasons of Covid.”
